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Choose your private equity manager carefully

VCTs and EISs rely on their managers' ability to select investments and dispose of them at a profit
Choose your private equity manager carefully

It is always important to pick a financial product run by competent people. But in the case of private equity investments such as venture capital trusts (VCTs) and enterprise investment schemes (EIS), it is even more crucial. Private equity funds’ returns rely on the ability of their managers to select and monitor investments carefully, and dispose of them at a profit.

The due diligence required for small unquoted companies is more rigorous than that for a listed company because there is less publicly available information. Unquoted companies are also likely to be younger than many listed companies so don't have a long track record to analyse. This means that VCT and EIS managers need to be able to spot potential, so require knowledge, expertise in and experience of investing in the sector the company is in.

They also need the contacts and ability to eventually make an exit at a good price because that is how private equity funds make their returns.

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